At the heart of the market
An interview with Scott Bradley, head of sales and global business development, London Stock Exchange cash secondary markets and Turquoise, London Stock Exchange Group.
London Stock Exchange Group started 2021 in line with analyst predictions that the bourse will be one of the strongest performers this year. Despite the challenges of 2020 with a pandemic raging and ongoing Brexit talks, LSEG’s capital markets business has forged ahead with plans to expand both its product and servicing offering as well as geographical reach.
Part of London Stock Exchange’s operational resilience throughout 2020 was due to robust business continuity planning which included remote working and strong connectivity tools. As a market infrastructure provider, it also worked closely with the financial community including investors, regulators and professional advisers to ensure that the capital markets remained open, orderly and resilient even during the most volatile times and record trading volumes.
Last March alone, 44.8 million trades were executed on London Stock Exchange’s Order Book, a 74% hike from the previous record in June 2016 when the UK held the referendum on leaving the European Union. The International Order Book, which provides access to some of the world’s fastest growing markets, also set records in March with $12.5bn value traded and a daily value traded of $1bn recorded.
This represented a staggering 104% increase year on year and 63% rise month on month – the highest since April 2015 which was the month leading up to UK elections and the prospect of a hung Parliament. Overall, the IOB generated a healthy 17% year on year growth in trading activity.
London Stock Exchange has cemented its position as the world’s most international exchange, with international companies accounting for ten of the largest initial public offerings last year. Overall, £9.2bn was raised, a 27% increase over 2019. It was also a busy time for global depository receipts with the London Stock Exchange accounting for 84% of all lit trading in GDRs in Europe, while Turquoise captured 36% of dark trading, making it the leading dark GDR venue by value traded. London Stock Exchange ranks as the second largest global exchange for capital raised via DRs, with roughly $69bn having been garnered since 2000.
One of the most notable deals last year was China Pacific Insurance Company’s $1.8bn listing – the largest debut in London since AIB in June 2017. CPIC’s listing was facilitated by Shanghai-London Stock Connect, which was launched in 2019 to allow Shanghai-listed companies to add a secondary listing in London and vice versa. In early December, London Stock Exchange welcomed its first registered market maker from Asia, Huatai Financial Holdings (Hong Kong) Limited, providing additional liquidity to Shanghai-London Stock Connect GDRs and all through the exchanges new connectivity hub situated in Hong Kong.
Last year also saw London strengthen its position as a leader in the sustainable finance arena with a further 20 issuers receiving London Stock Exchange’s Green Economy Mark, bringing the total number of holders to over 90 with a combined market capitalisation in excess of £140bn. Introduced in 2019, the classification identifies companies and investment funds listed on all segments of the Main Market and AIM that are driving the global green economy. To qualify, equity issuers need at least half of their revenues to emanate from environmental activities.
The growing interest in environmental, social and governance (ESG) issues is also reflected in exchange traded products (ETPs) where nearly half of the listings in 2020 were in the ESG space.
The trajectory for European listed ETPs is only set to increase and despite market turbulence, the industry grew by 26.4% last year, reaching a new record of $1.3tn AUM with $138bn of new flow, according to figures from data provider TrackInsight. Surpassing the $1tn mark for the first time was seen as a significant milestone for a sector growing at approximately 20% per annum over the past decade.
ETPs first made their debut on the London market over 20 years ago and today, it is home to 1,586 ETPs divided between 1,287 ETFs and 299 exchange traded commodities (ETCs). In 2020, daily ETP turnover, as a percentage of total London Stock Exchange orderbook turnover, reached a record high of 19.4% (£620m) in December.
Investors not only have exposure to varied themes and asset classes through London Stock Exchange listed ETPs but also access to sophisticated trading tools. Last year, the exchange introduced new and improved RFQ 2.0. which has functionality for clients to break down larger ETP orders into sub-LIS sizes, allowing clients to benefit from its sub-LIS auction model with an orderbook sweep. This opens further the opportunity for electronic and algorithmic development of trading strategies to access London Stock Exchange on-book liquidity in ETPs with greater success in the search for both liquidity and price improvement.
Looking ahead, London Stock Exchange aims to continue to broaden its income streams and global position. The exchange plans to take advantage of being located in its optimal time zone to reach out to investors in Asia and other countries looking for ease of trading, liquidity, new products and tools. With truly global positioning, sitting at the heart of the international time zone, London Stock Exchange acts as a bridge between markets from East to West, overlapping market hours across some 27 markets whilst allowing for real-time access to global products. All whilst operating under the respected and trusted rules of the London Stock Exchange. The Global Equity Segment (GES) which was launched specifically to provide investors with global trading exposure and thematic opportunities whilst taking advantage of central time zone positioning will feature highly in the exchanges plans for 2021. Investors, both Retail and Institutional alike continue to search for true international exposure. Accessing many of the most heavily traded US blue chip securities and Asian US-listed ADRs admitted for trading during London hours opens broader investor choice with ease of access.
Closer to home, London Stock Exchange continues to recognise the significance of the growth in digital platforms becoming more mainstream in the distribution of information and access to many of the exchanges’ tools, services and products. This is especially true with regard to Retail investors where www.londonstockexchange.com is often considered a key source of information on navigating the investment and trading landscape. A major new revamp of this digital presence through the roll out of a new website and the development of new Issuer and Member Services platforms confirms this commitment. Both platforms are designed to create a digital community experience across the capital markets ecosystem, with access to a range of exclusive services and insights focused on data products, marketing opportunities, content and events.